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Attorney General of Virginia


 

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Charlotte Gomer, Director of Communication
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ATTORNEY GENERAL HERRING SHUTS DOWN MASSIVE CHARITY FRAUD TELEFUNDING OPERATION

~ Defendants placed more than 1.3 billion deceptive fundraising calls including over 40 million into Virginia claiming to support veterans, children, firefighters; Herring joins FTC, 38 states, and the District of Columbia in shutting down operation ~

RICHMOND – Attorney General Mark R. Herring has shut down a massive telefunding operation that bombarded 67 million consumers with over 1.3 billion deceptive charitable fundraising calls – mostly illegal robocalls – over 40.3 million of which were made to Virginians. The defendants collected more than $110 million using their deceptive solicitations. Attorney General Herring joined the Federal Trade Commission (FTC) and 46 agencies from 38 states and the District of Columbia in stopping the massive operation.

 

Associated Community Services (ACS) and a number of related defendants have agreed to settle charges by the FTC and state agencies that they duped generous Americans into donating to charities that failed to provide the services they promised. The complaint names ACS and its sister companies Central Processing Services and Community Services Appeal; their owners, Dick Cole, Bill Burland, Barbara Cole, and Amy Burland; and ACS senior managers Nikole Gilstorf, Tony Lia, John Lucidi, and Scot Stepek. In addition, the complaint names two fundraising companies allegedly operated by Gilstorf and Lia as spin-offs of ACS, Directele and The Dale Corporation.

 

“ACS and its affiliates facilitated widespread fraud on behalf of numerous purported charitable organizations and used technology to repeatedly harass Virginians with millions of illegal phone calls, including robocalls,” said Attorney General Herring. “I’m pleased my Consumer Protection Section and I were able to help shut down this massive illegal operation, stop the perpetrators from being able to engage in this kind of egregious conduct going forward, and recover money that can now go to legitimate charitable causes. I also want to thank our state and federal partners for their partnership and hard work on this case.”

 

“Deceptive charitable fundraising can be big business for scammers, especially when they use illegal robocalls,” said Daniel Kaufman, Acting Director of the FTC’s Bureau of Consumer Protection. “The FTC and our state partners are prepared to hold fraudsters accountable when they target generous consumers with lies.”

 

According to the Complaint, the defendants knew that the organizations for which they were fundraising spent little or no money on the charitable causes they claimed to support – in some cases, as little as one-tenth of one percent. The defendants kept as much as 90 cents of every dollar they solicited from generous donors on behalf of the charities.

 

Attorney General Herring and his colleagues allege in the Complaint that the defendants made their deceptive pitches since at least 2008 on behalf of numerous organizations that claimed to support homeless veterans, victims of house fires, breast cancer patients, children with autism, and other causes that well-meaning Americans were enticed to support through the defendants’ high-pressure tactics. ACS were also the major fundraiser for the sham Cancer Fund charities that were shut down by Attorney General Herring, the FTC, 49 other states, and the District of Columbia in 2015.

 

In many instances, the Complaint alleges, ACS and later Directele knowingly violated the Telemarketing Sales Rule (TSR) by using soundboard technology in telemarketing calls. With that technology, an operator plays pre-recorded messages to consumers instead of speaking with them naturally. Use of such pre-recorded messages in calls to first time donors violates the TSR. Use of the technology in calls to prior donors also violates the TSR unless call recipients are affirmatively told about their ability to opt out of all future calls and provided a mechanism to do so; the defendants did not make that disclosure. Most of Directele’s soundboard calls originated from call centers in the Philippines and India.

 

The complaint also charges ACS with making harassing calls, noting that ACS called more than 1.3 million phone numbers more than ten times in a single week and 7.8 million numbers more than twice in an hour. More than 500 phone numbers were even called 5,000 times or more.

 

The ACS defendants were the subject of 20 prior law enforcement actions for their fundraising practices. The ACS defendants stopped operating in September 2019. Gilstorf purchased Directele and Dale Corp in October 2019 and, with Lia, the Directele defendants allegedly continued the deceptive fundraising and illegal telemarketing practices. The complaint alleges the defendants violated the Virginia Solicitation of Contributions law, the FTC Act, the TSR, and numerous other state laws.

 

The terms of the settlements with the defendants, which are now pending court approval, are as follows:

 

Associated Community Services Defendants

Each of these defendants will be permanently prohibited from conducting or consulting on any fundraising activities and from conducting telemarketing of any kind to sell goods or services. In addition, they will be prohibited from using any existing donor lists and from further violations of state charitable giving laws, as well as from making any misrepresentation about a product or service. The defendants will also be subject to the following monetary judgments:

  • Associated Community Services, Inc.; Community Services, Inc.; Central Processing Services, Inc.; and Richard “Dick” Cole are subject to a monetary judgment of $110,063,843, which is suspended due to an inability to pay.
  • Community Services Appeal, Inc. and Barbara Cole are subject to a monetary judgment of $110,063,843, which is partially suspended due to an inability to pay. Barbara Cole also will be required to turn over the proceeds of the sale of a vacation home in Michigan.
  • Robert W. “Bill” Burland and Amy J. Burland are subject to a monetary judgment of $110,063,843, which is partially suspended due to an inability to pay. Amy Burland will be required to turn over $450,000.
  • Directele Defendants and ACS Senior Managers Scot Stepek and John Lucidi

 

Each of these defendants will be permanently prohibited from any fundraising work or consulting on behalf of any charitable organization or any nonprofit organization that claims to work on behalf of causes similar to those outlined in the complaint. They will also be prohibited from using robocalls for any form of telemarketing, using abusive calling practices, or making any misrepresentation about a product or service. In addition, the defendants will be required to clearly and conspicuously disclose when a donation they are requesting is not tax deductible.

 

In addition, the two corporate defendants—Directele Inc. and The Dale Corporation—will be required to cease operations and dissolve.

 

The defendants will also be subject to the following monetary judgments:

  • Scot Stepek will be subject to a monetary judgment of $110,063,843, which is partially suspended due to an inability to pay. Stepek will be required to sell a ski boat in his possession and turn over the net proceeds from the sale.
  • Directele Inc., The Dale Corporation, Nikole Gilstorf, and Antonio Lia will be subject to a monetary judgment of $1.6 million. Gilstorf and Lia also will be subject to a judgment of $110,063,843. The judgments are partially suspended due to an inability to pay. Gilstorf and Lia will each be required to turn over $10,000.
  • John Lucidi will be subject to a judgment of $110,063,843, which is partially suspended due to an inability to pay. He will be required to turn over $25,000.

Joining Attorney General Herring and the FTC in this case are the attorneys general of Alabama, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Utah, Washington, West Virginia, Wisconsin, and Wyoming; the secretaries of state of Colorado, Georgia, Maryland, North Carolina, and Tennessee; and the Florida Department of Agriculture and Consumer Services and the Utah Division of Consumer Protection.

 

The funds being surrendered by the defendants will be paid to an escrow fund held by the State of Florida and, following a motion by the participating states and approval by the court, be contributed to one or more legitimate charities that support causes similar to those for which the defendants solicited.

 

The complaint and stipulations were filed in the U.S. District Court for the Eastern District of Michigan.

 

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